Portugal: Economic and Political Outline

Economic Indicators

Since 2009, Portugal has been suffering from the worst economic crisis since the fall of the dictatorship in 1974. This deep recession was caused by the collapse of foreign demand and the restrictive financial conditions that have affected all the sectors of the economy, such as exports and investments in particular. After three years of recession, which was further worsened by the government's austerity measures (-1.8% in 2013), by late 2013 the Portuguese economy has been showing signs of recovery and a return to positive growth is expected in 2014 (0.8%).

In May 2011, Portugal signed a 78 billion EUR bailout agreement with the Troika (EU-ECB-IMF), in order to reduce its budget deficit. Under this agreement, the government launched a plan of reforms and structural adjustments, including budget cuts, tax increases, a large privatization program expected to earn the country 7 billion EUR, a bank recapitalization plan, and a reform of the labor market. In 2013, after three years of unprecedented austerity measures, the country's stability was shaken. The Minister of European Affairs resigned and the President of the Republic Anibal Cavaco Silva put the policy of austerity publicly in questions and was supported by the Constitutional Court. Debt continued to deepen, reaching more than 125% of the GDP. The 2014 budget, which was amended at the beginning of the year, includes new budget cuts, with the aim of saving 3.9 billion euro. Portugal has made a pledge to its creditors to reduce its public deficit to 4% in 2014. The country has been trying to regain investors' trust in order to fund its heavy debt burden on the financial markets and avoid the need for a second bailout plan.

With an unemployment rate rising to over 16%, which affects 36% of people under 25 years of age, an increase in social inequality between the north and the south, and the weakening of purchasing power, social tensions have been more keenly felt.

Main Indicators

2011

2012

2013

2014

2015 (e)

GDP (billions USD)

238.11

212.26

220.06

228.17

231.97

GDP (Constant Prices, Annual % Change)

-1.3

-3.2

-1.4e

1.0

1.5

GDP per Capita (USD)

22,417

20,065

20

21,748e

22,089

General Government Balance (in % of GDP)

-6.5

-3.9

-2.9

-2.3

-1.5

General Government Gross Debt (in % of GDP)

108.2

124.1

128.9

131.3e

128.7

Inflation Rate (%)

3.6

2.8

0.4

0.0

1.1

Unemployment Rate (% of the Labor Force)

12.7

15.5

16.2

14.2

13.5

Current Account (billions USD)

-16.71

-4.28

1.17e

1.45e

1.93

Current Account (in % of GDP)

-7.0

-2.0

0.5

0.6

0.8

Source:
IMF - World Economic Outlook Database
, Last Available Data

Note: (e) Estimated Data

Main Sectors of Industry

The agricultural sector, with low productivity due to low level of mechanization, represents a little over 2% of Portugal's GDP and employs 11% of the population. The main crops are cereals, fruits, vegetables and wine. The exports of Port wine represent 1.4% of total exports and the country is one of the world's 10 largest wine exporters. Portugal has many natural resources. The mining sector (copper, tin) represents 6% of the GDP and Portugal is one of the main exporters of marble. The forests provide a large portion of the world's cork supply.

The manufacturing industry is modern and it is made up of small and medium-sized companies. Its main sectors of activity are metallurgy, mechanical engineering, textiles and construction. Moreover, the country has increased its role in the European automobile sector and has a world class mold manufacturing industry.

Services, particularly tourism, play an important role which is increasing rapidly. The tertiary sector contributes to almost 75% of the GDP and employs 60% of the active population.

Indicator of Economic Freedom

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Business environment ranking

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Country Risk

Foreign Trade in Figures

Portugal's economy is open to foreign investment, trade represents more than 75% of the GDP (during the period 2010-2012). Becoming a member of the European Union changed the structure of the Portuguese imports and exports. The country exports more and more technological equipment instead of the traditional agricultural products or products from the textile and clothing industry. The European Union is Portugal's main client, followed by the United States. Other commercial partners of Portugal are China, Nigeria and Brazil.

The trade balance of Portugal is structurally in deficit, however it saw an improvement during the crisis of 2009, imports falling more quickly than exports. In 2013, the country's trade surplus reached historical levels, with exports growing more quickly than imports.

Foreign Trade Indicators

2009

2010

2011

2012

2013

Imports of Goods (million USD)

71,648

75,635

82,466

72,162

75,194

Exports of Goods (million USD)

44,310

48,736

59,675

58,328

62,872

Imports of Services (million USD)

14,154

14,303

15,808

13,252

14,015

Exports of Services (million USD)

22,401

23,030

26,349

24,216

27,019

Imports of Goods and Services (Annual % Change)

-9.9

7.8

-5.8

-6.6

3.6

Exports of Goods and Services (Annual % Change)

-10.2

9.5

7.0

3.1

6.4

Imports of Goods and Services (in % of GDP)

34.0

37.4

38.6

38.0

38.3

Exports of Goods and Services (in % of GDP)

27.1

29.9

34.3

37.3

39.3

Trade Balance (million USD)

-24,981

-25,266

-19,667

-11,570

-9,646

Trade Balance (Including Service) (million USD)

-16,408

-16,636

-9,067

-256

3,767

Foreign Trade (in % of GDP)

61.1

67.3

72.9

75.4

77.5

Source:
WTO - World Trade Organization
; World Bank
, Last Available Data

Political Outline

Executive Power

The President is the Head of State. He is elected by universal suffrage for a five year term and is the Commander-in-chief of the Army. After a general election, the leader of the majority party or coalition is usually appointed to be Prime Minister by the President, for a four year term. The Prime Minister is the head of the government, and he holds the executive power, which includes implementing laws and overseeing the everyday running of the country. The Council of Ministers is appointed by the President on the recommendation of the Prime Minister. There is also a Council of State, which acts as an advisory body to the President.

Legislative Power

Portuguese legislative power is unicameral. The parliament, called the Assembly of the Republic, has 230 seats. The members are elected by universal suffrage for a four year term and the executive branch of government is directly or indirectly dependent on the support of parliament often expressed by a vote of confidence. The Prime Minister cannot dissolve the Assembly, but the President can do so and call for an early election if he so wishes. Portuguese citizens enjoy considerable political rights.

Main Political Parties

Political life in Portugal is mainly dominated by two parties: the PS (en portugais)(Socialist Party) and the PSD (Social Democratic Party). Other parties active in the country are: - The PP (Popular Party) – Christian democrats, - The PCP (Portuguese Communist Party) – left-wing party, - Bloco de Esquerda (Left-wing block) - Association of parties left of the Communist party

Indicator of Freedom of the Press

The world rankings, published annually, measures the violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire sent to partner organizations,150 RWB correspondents, journalists, researchers, jurists and activists of human rights, including the main criteria - 44 in total - to assess the situation of press freedom in a given country. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

Indicator of Political Freedom

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.